Hearing In Megaupload Case To Determine Fate Of Users' Data

Megaupload boss Kim Dotcom in February as he is granted bail in a New Zealand court. Dotcom is in New Zealand waiting on a U.S. bid to extradite him on online piracy charges.

Michael Bradley
/ AFP/Getty Images

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On Friday morning a hearing scheduled in the criminal copyright case of Megaupload may have implications for all kinds of companies that sell storage space in the cloud — storage space used for anything from music files to family photos, research data to movie collections. The hearing will focus on what happens when the federal government blocks access to allegedly illegal files along with clearly legal ones.

Among those affected by the hearing is Kyle Goodwin. He's building a new business taking videos of local sports teams in Cleveland. He sells highlights to family and friends of the players. He backed all his material up on a hard drive — until he had one of those bad days when everything technical goes wrong.

"Right in the middle of a save I knocked it [the hard drive] off my coffee table and it hit the floor," he says. He tried to open the drive and it wouldn't work. Panicked, he realized, "I can't get any of the files off of that external hard drive and that was basically everything I've worked on for the last six months."

Then Goodwin smiled and remembered he also stored most of his files in a paid account with Megaupload. He went to the site to retrieve his videos. "But all I got was the opening screen," he says. Panic set it in again. "I couldn't get into any of the files. I couldn't get into the file manager. I didn't know what was going on."

"When I heard about that," says Goodwin, "I'm like, 'This doesn't even involve me so how do I get my files back? I need them now.'"

Alas, he may never get them back. That's what the lawyers are in court about. Megaupload rented servers from a company called Carpathia Hosting — that's where Goodwin's files are.

Megaupload is the only company that can unlock the files of customers like Goodwin. But Megaupload is blocked from access by the Federal government. Carpathia says it's costing it $9,000 a day to maintain the servers, and Megaupload can't access it's bank accounts to pay. Carpathia's asking a Federal court to tell it what to do with the servers.

The Justice Department refused to give an interview but in court documents asks the judge not get involved in what it calls a "private contractual matter" between Carpathia and Megaupload.

Online civil rights group the Electronic Frontier Foundation is filing a brief on behalf of Goodwin and other innocent customers. Julie Samuels, an attorney with the EFF, says this online case shouldn't be seen any differently than a real world case. She says imagine if the government were to seize a bank.

"There are innocent third parties who might have items at that bank in a safety deposit box, on some other kind of deposit account," Samuels says. In that case, she says, "The law and the Constitution, frankly, contemplate a way for those innocent third parties to get their grandmothers' pearls back."

Samuels says there's no reason that the digital world should be different from the real one.

But the digital world is different, says copyright attorney Jim Burger. He says in the Megaupload case the court would probably have to appoint someone to sort through the huge amount of material involved.

He says that person would have to say, "'Oh yes, this 100 megabytes is Mr. Smith's and it's legal, it's his personal stuff. But this 50 megabytes is clear infringing.'"

"It would take forever to sort through 25 petabytes of data," Burger says.

He and Samuels agree that the implications of what happens to the material on the servers are great for companies like Google, Amazon, Apple and other cloud storage businesses that are trying to entice consumers to trust them with their personal data.

If Megaupload's legitimate customers can't retrieve their files, Burger admits many people will be afraid to use cloud storage.

Burger says ultimately there are no laws directly applicable. It will be up to the judge to determine what is fair.

Update: All the parties appeared Friday before Judge Laim O'Grady in a Federal District Court in Alexandria, Va. The judge said he was "sympathetic" to Carpathia Hosting's financial situation. However, he didn't want to step in. He asked all the parties to go and talk with a magistrate judge who would help them come up with a solution they could all agree on. O'Grady told them to come back in two weeks with a solution. Kyle Goodwin still can't access his videos, but for now they haven't been destroyed.

Correction: An earlier version of this post misspelled Kyle Goodwin's last name. It has been corrected throughout.

Copyright 2012 National Public Radio. To see more, visit http://www.npr.org/.

Transcript

RENEE MONTAGNE, HOST:

Companies like Apple, Google and Amazon are trying to get more customers to store everything from family photos to favorite films online in what's known as cloud-based storage. Today, a hearing in the criminal copyright case of the file-sharing site Megaupload could have implications for all kinds of cloud-based businesses. The hearing will focus on what happens when clearly legal files get blocked by authorities, along with allegedly illegal ones. NPR's Laura Sydell reports.

LAURA SYDELL, BYLINE: Kyle Godwin was a customer of Megaupload, and last January he was having a very bad day. He's building a new business taking videos of local sports teams in Cleveland. He sells highlights to family and friends of the players. He backed all his material up on a hard drive, but then...

KYLE GODWIN: Right in the middle of a save I knocked if off my coffee table and it hit the floor. And I can't get any of the files off of that external hard drive, and that was basically everything I've worked on for the last six months.

SYDELL: Argh. Then Godwin remembered he had a paid account with Megaupload, where he had most of his files backed up. Godwin went to the site to retrieve his videos.

GODWIN: But all I got was the opening screen. Then I couldn't get into any of the files, couldn't get into the file manager. I didn't know what was going on.

SYDELL: What was going on was that the Justice Department had shut down Megaupload and arrested several of its top executives for criminal copyright infringement. The DOJ claimed that the vast majority of traffic from the site's 66 million customers was illegal.

GODWIN: When I heard about that, I'm like, this doesn't even involve me. So how do I get my files back? I need them now.

SYDELL: Godwin may never get them back. That's what the lawyers are in court about this morning. Megaupload rented servers from a company called Carpathia Hosting. That's where Godwin's files are. Megaupload is the only one that can unlock the files of customers like Kyle Godwin, and they have been shut out by the Federal government. Carpathia is asking a Federal court to tell it what to do with the servers.

The Justice Department refused to give an interview, but in court documents, it's asking the judge not to get involved in what it calls a private contractual matter between Carpathia and Megaupload.

The online civil rights group the Electronic Frontier Foundation is filing a brief on behalf of Godwin and other innocent customers. Julie Samuels is an attorney with the EFF, and she says this online case shouldn't be any different than a real-world case, say if a bank were to be seized.

JULIE SAMUELS: There are innocent third parties who might have items at that bank in a safety deposit box, in some other kind of deposit account. And the law - and the Constitution, frankly - contemplate a way for those innocent third parties to get their grandmother's pearls back.

SYDELL: Samuels says there's no reason that the digital world should be different from the real one, except - well, it is. Jim Burger, a copyright attorney, says in this case, we are talking about a huge among of material, and the court would probably have to appoint someone to sort through it.

JIM BURGER: To say, oh, yes, this 100 megabytes is Mr. Smith's, and it's legal. It's his personal stuff. But this 50 megabytes is clear infringing. It would take forever for humans to sort through 25 petabytes of data.

SYDELL: Yet Burger and Samuels agree that the implications of what happens to the material on the servers are great. Companies like Google, Amazon and Apple are trying to entice their customers to store more stuff online, from family photos to legally purchased films. If Megaupload's legitimate customers can't retrieve their files, Burger admits many people will be afraid to use cloud storage.

BURGER: If I'm in the cloud storage business, I want this done right.

SYDELL: Ultimately, says Burger, there are no laws directly applicable. It will be up to the judge to determine what is fair.